Business Activities Assignment | Homework For You
THE PROBLEM: You are launching into a business in the name and style of your choice. It has to be a manufacturing business. It means that your business would involve, buying materials, transforming it using plant and machinery, and selling it. Keep in mind the conditions given in this project. Strictly adhere to the conditions.
ASSUMPTIONS AND REQUIREMENTS:
You can make any assumption, provided they are reasonable in an actual business situation, subject to the conditions 1 to 11 (detailed below). Realistic nature of the project would involve factors such as volume of turnover, cost structure, type and nature of transaction. Please draw up the accounts and reports in proper form as if they were made out for a real life business.
CONDITIONS:
- Date of commencement of business 1 july 1991
2.1 Capital to be contributed = 55,52,660
2.2 Long term loans equal to maximum of 1.5 times the capital is available at the rate of 10% per annum. Long term loan has to be at least equal to capital.
3. Every student will have at least 30% of his total assets invested in fixed assets. Depreciation on monthly basis is to be computed using the straight line method of depreciation. Life of asset can vary between 5 to 15 years for different assets.
4. Credit sales can be eight times cash sales.
5. Credit purchase can be eight times cash purchase.
6. Wage cost could be 10% to 30% of sales.
7. Cash balance at the end of any year is to be maximum of 5 months and minimum of 2-month cash expenses. Deployment of surplus cash on short term inter-corporate market at 6% per annum is possible.
8. Sales volume will increase by 10% over the previous year, sale price will increase by 5% over the previous year and purchase price will increase by 5% every six-month-basis, all reckoned on a calendar basis.
9. All other costs will remain stable over the period.
10. Assume no gestation period. That is, the business starts operations from day one. Irrespective of your starting date of business – your first accounting period would end on 31st March of that year [with a condition of business running for at least 3 years].
11. You need to have at least 10 transactions per accounting period.
REQUIRED: Part 1(Compulsory and worth 30 marks)
1) You are required to prepare the accounts of the business as if owned by you as an individual proprietorship in any name and style of your choice, with in the frame work of the conditions one through eleven detailed above, for three yearly accounting periods.
2) Prepare a precise chronological statement of all transactions
Prepare all the three financial statement [i.e. Balance Sheet, Income Statement and Cash Flow Statement] for each accounting period. You need to have three periods. REQUIRED: Part II (Compulsory and worth 10 marks)
1) Analyze the financial statement of the company using common ratios discussed in the class, for the above three accounting periods.
2) Analyze the cash flow statement of the company, prepared as above.
3) Analyze the costing aspects of the company, based on the financial statements prepared as above.
